BENGALURU: IT services provider Infosys on Sunday posted a 3 per cent increase in net profit at Rs 5,360 crore for Q1 FY23 compared to Rs 5,195 crore in the same quarter last year.
However, sequentially the company reported a 5.7 per cent decrease in net profit. It reported Rs 5,686 crore net profit in Q4FY22. The company missed street estimates, as analysts forecasted around 6-9 per cent increase in consolidated net profit.
The company's revenue stood at Rs 34,470 crore, up 23.5 per cent in the first quarter compared to Rs 27,896 core during the same quarter of the previous fiscal.
Its operating margin is under pressure at 20.1 per cent in the June quarter, as it declined 3.6 per cent Y-o-Y and 1.4 per cent Q-o-Q due to rise in wages. The company also saw a dip in its utilisation levels to 84.7 per cent in the first quarter from 88.5 per cent in Q1FY22.
The IT giant has also increased its FY23 revenue guidance to 14-16 per cent from 13-15 per cent. It retained its margin guidance at 21-23 per cent. "We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition," said Salil Parekh, CEO and MD, Infosys.
He said that the company is investing in rapid talent expansion, and this has resulted in a strong performance in Q1 and increase in FY 23 revenue guidance to 14-16 per cent.
Infosys' large deal total contract value (TCV) stood at $1.7 billion in the June quarter. Parekh added that the pipeline for deals is large, and the demand outlook is good. Digital accounted for 61 per cent of overall revenues, growing at 37.5 per cent in constant currency.
Attrition rose to 28.4 per cent
The company's attrition continues to remain elevated as it stood at 28.4 per cent in the first quarter compared to 27.7 per cent in the previous quarter. As planned, the company is planning to hire 50,000 freshers in this fiscal. The company added 21,171 people in the June quarter, and this is the highest number among its peers. Infosys’ headcount stood at 3,35,186 as of June 30.
“We are fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth,” said Nilanjan Roy, Chief Financial Officer, Infosys. “We continue to optimise various cost levers to drive efficiency in operations,” he added.
Across the IT industry, there is decline in margins. Sharekhan, a brokerage company said, “We expect the EBIT margin of most IT services companies to decline sequentially, owing to higher retention costs, wage revision, visa costs, and rising travel expenses.”
“We forecast EBIT margin of tier-I companies to decline by 50-206 bps q-o-q and 30 bps to 207 bps q-o-q for mid-tier companies. Though rupee depreciation is expected to offset margin headwinds partially, cross-currency headwinds have limited the extent of benefits of rupee depreciation against USD,” it added.